I am frequently asked why people seem to dislike economists so much. It’s a complicated question to answer. There are lots of reasons, many represented in the comments section of this blog. One could be economists’ stubborn insistence on evidence-based analysis of programs we would all like to see succeed. Another reason is the propensity of economists to complain like curmudgeons about popular ideas that seem to be embraced by everyone but make little economic sense.
I’m taking this latter path to unpopularity. This week the target is zero, or more specifically the calls and efforts to lead a zero net (insert bad thing here) lifestyle.
Zero abounds throughout the UC system. A team at UCLA is working on zero net-energy building materials. My campus at Davis is the site of what the campus calls the “largest planned zero net energy community in the United States.” Not to be outdone, UC Merced has a Triple Zero target by 2020. And there is a systemwide carbon neutrality initiative with a goal of making the UCs as a whole zero-net carbon by 2025. Zero has also moved into official policy-making. The California Public Utilities Commission has spearheaded an effort to make all new California homes zero-net energy by 2020, and all commercial buildings ZNE by 2030. Fundamentally, the allure of such initiatives is to start making headway in reducing the consumption of something we may run out of (e.g., water or oil) or reducing the output of something that is doing us harm (e.g., greenhouse gasses). But we have to ask ourselves whether it’s the best way to make progress.
It’s not that I’m opposed to the concept of zero net-carbon, it’s a matter of scale. I travel a lot and meet quite a few folks who still don’t believe in climate change (Americans mostly, but also a cab driver in Canada, a barrista in Australia – the common thread seems to be a dislike of Al Gore). In an attempt to convert such people I point out the fact that we are putting more GHG into the atmosphere than the earth can absorb, and if we continue on that path we eventually get to a REALLY high concentration of GHG. Even folks who may not, for some reason, be persuaded by today’s state of the art climate models should recognize that infinite carbon dioxide would be a bad thing. So sooner or later the earth is going to have to get back to at least zero net GHG.
The problem, from an economist’s perspective is therefore one of geographic scope. The only meaningful scale on which to pursue zero net carbon is a global one. One way to get to global balance would be for every house, every person, every store, to lead a zero-net carbon existence. But this is almost certainly not the best, or even a realistic, way to get the globe into balance. One of the basic insights provided by economic philosophy has been the concept of comparative advantage, which produces gains from trade. The ability to specialize on the things we do well is one of the fundamental drivers of increased productivity and economic growth.
What is the harm of a zero-net (bad things) framework? I see a few serious concerns. One is that it distorts the way these self-contained communities view the costs and benefits of their own resources. This has been captured in discussions of how to price energy in zero-net energy communities. For example, if you’ve got enough solar panels and batteries, the marginal cost of producing renewable power is zero, and there is a temptation to simply charge a monthly fixed fee for power. That’s what’s done in West Village.
This highlights one of the distortions of zero. Namely, why stop at zero? If there are ample renewable resources on hand, wouldn’t it make sense to push some back out to the grid and displace someone else’s power. In other words, even though the marginal cost of generating power may be zero, the opportunity cost of that power is whatever you can sell it for. Again, if there are potential gains from trade, don’t let zero stand in the way.
A second concern with the zero framework is an overemphasis on hitting zero. The zero framework implies that there is great reward when you reach zero, but if you get down to 10%, you are a failure. Witness the handwringing that is playing out over the “failure” of West Village, which is stuck at about 85% self supply. Much of climate policy is treating targets as all or nothing goals. Economists focus on the marginal (incremental) benefit of each successive MW produced or GHG ton saved and compare it to the costs of those savings. It could be that it’s pretty cheap to get down to 50% or 80%, and ridiculously expensive to get the last 10% to get down to “zero.”
A third problem is that zero promotes a fiction of self sufficiency and isolation that might become a reality. The wonders of smart-grid technology hold the promise of a more integrated system where refrigerators in Sacramento can be cycled to offset intermittent renewable generation in Fresno. Or technology could be deployed to create pockets of zero-net consumption that end up having to balance their own supply variation internally. Why is a zero community better than a zero State? Or a zero multi-state grid?
Some of these risks may be washed out in implementation of “zero.” After all, many definitions of net zero allow buildings or communities to credit energy or GHG reductions made elsewhere. This is just getting to zero by checking the boxes in a certain order, but it makes you wonder what the point is. If I can call my house net zero because it’s paying some money to a solar panel somewhere else, isn’t that just a form of retail choice? If that’s what it takes to reap gains from trade in GHG reductions, I guess it’s better than nothing. But from where I sit, it would make more sense to work for an aggregate goal and spread the burdens proportional to the costs.
If these zero (bad things) targets are just aspirational and serve as a way to get people excited and mobilized about reducing (bad things), they are not necessarily a bad thing. However, a narrow focus on a local zero fails to account for the big picture and can cause us to overlook more meaningful global solutions. After all, the best way to a sustainable climate may have zero zero.